A breath of fresh air

Research & Investment

 

A breath of fresh air

By Colin Twiggs
July 16, 2016 1:00 p.m. AEST (11:00 p.m. EDT)

Advice herein is provided for the general information of readers and does not have regard to any particular person’s investment objectives, financial situation or needs. Accordingly, no reader should act on the basis of any information contained herein without first having consulted a suitably qualified financial advisor.

We still face the political uncertainty surrounding a US election in November but markets seem to have decided the outcome is a foregone conclusion. Let’s hope they are right this time. What we seem to be witnessing is an attitude of “let’s ignore the distractions and get back to work”. Even a coup in Turkey seems unlikely to rattle markets.

Low initial jobless claims — at levels last seen in the 1970s — helped US indices break through resistance.

Initial Jobless ClaimsTo enlarge image, right-click and select “View Image”.

The Freight Index continues to indicate high activity levels.

Freight IndexTo enlarge image, right-click and select “View Image”.

Strong employment levels, hours worked, and average earnings, combine to provide a reassuring outlook for GDP. With annual CPI at 1.1%, real GDP growth looks slow but steady.

Nominal GDPTo enlarge image, right-click and select “View Image”.

Global

Dow Jones Global Index broke through resistance to indicate a primary up-trend. Momentum troughs above zero strengthen the signal.

DJ Global Index

North America

The S&P 500 broke through the band of resistance between 2100 and 2130. Expect retracement to test the new support level. Low 13-week Twiggs Money Flow warns that the breakout may be tentative. Reversal below 2100 would signal another test of support at 2000. Breach of primary support at 1820 to 1870 is unlikely.

S&P 500 Index* Target calculation: 2100 + ( 2100 – 1800 ) = 2400

A monthly chart of the Dow Jones Industrial Average displays a similar breakout. Rising 13-week Momentum strengthens the signal.

Dow Jones Industrial Average* Target calculation: 18000 + ( 18000 – 15500 ) = 20500

A CBOE Volatility Index (VIX) at 13.00 indicates low market risk.

S&P 500 VIXCanada’s TSX 60 broke through resistance at 840 to signal a primary up-trend. Rising Momentum again strengthens the signal.

TSX 60

Europe

Dow Jones Euro Stoxx 50 remains hesitant. But breakout above resistance at 3150 would complete a double-bottom reversal.

Dow Jones Euro Stoxx 50* Target calculation: 3100 + ( 3100 – 2700 ) = 3500

Boosted by the falling Pound, the Footsie broke resistance at 6500 to signal a primary up-trend.Troughs above zero on 13-week Money Flow confirm buying pressure.

FTSE 100* Target calculation: 6500 + ( 6500 – 6000 ) = 7000

Asia

The Shanghai Composite Index is close to completing a higher trough. Breakout above 3100 would signal a primary up-trend.

Shanghai Composite IndexJapan’s Nikkei 225 Index is far more tentative, having recently respected primary support at 15000. Breakout above 17500 seems unlikely but would complete another double-bottom reversal.

Nikkei 225 Index* Target calculation: 15000 – ( 18000 – 15000 ) = 12000

India’s Sensex has clearly penetrated its descending trend line on the monthly chart and is rallying strongly. 13-Week Money Flow has likewise recovered above zero to suggest a primary up-trend. But we need a correction to test support — and a Momentum trough above zero to confirm.

SENSEX

Australia

The ASX 200 closed above resistance at 5400, signaling a primary up-trend. Expect retracement to test the new support level. Low 13-week Money Flow indicates investors are hesitant.

ASX 200* Target calculation: 5400 + ( 5400 – 4800 ) = 6000

The major banks continue to weigh on the index, with the ASX 300 (not “ASX 30”) Banks Index testing primary support at 7200. Rising Momentum, below zero, suggests a short-covering rally to test resistance at 8000. Breakout remains unlikely, but would complete a double-bottom reversal.

ASX 300 Banks Index

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